If your retirement plan only works when stocks go up, that is not a plan, it is wishful thinking. Markets do not care that you are about to retire. They go up, down, and sideways without regard for your retirement journey. So what happens if a selloff hits just before your retirement party? Let us build a plan that can take a punch and keep moving forward.

A quick what if...

It is two months before your last day. Over coffee, you see headlines screaming about a market plunge. Your balance is down double digits. Do you delay retirement, slash spending, or try to “win it back” by taking more risk?

None of the above. The right answer is, "we already planned for this."

What counts as a crash

In plain terms, a crash is a steep, sudden drop, often 15 to 20 percent or more. Scary, yes. Also normal. Recent history gave us several fast declines followed by recoveries. Drops tend to arrive quickly, while recoveries can take time. Your plan should let you cover expenses without selling investments while they are down.

The real risk is the order of returns

It is not the average return that does the most damage, it is the order it arrives in. A rough first year or two can hurt more than the same losses later, because you are withdrawing while prices are lower. This is called "sequence of returns risk." The defense sounds simple enough: avoid selling growth investments during the worst days and use safe cash reserves to fund spending until markets heal.

Here's a framework that can keep you steady:

1. Three to four years of reserves. Hold cash, money markets, and short term bonds to cover several years of withdrawals. This buys your stock sleeve time to recover.
2. Guardrails for withdrawals. As an example, of how this could work: if the portfolio falls by -15%, trim distributions a bit. If it rises by, say, 15%, give yourself a raise. Modest adjustments early prevent major cuts later.
3. Rebalance with purpose. When stocks drop enough to push your mix off target, sell some bonds or tap cash to buy equities. Think of it as buying quality on sale.
4. Tax smart moves. Down markets can be a time to harvest tax losses in taxable accounts or do Roth conversions at lower prices. Morningstar has a great article that came out post-market correction this past spring.
5. Flex your lifestyle dials. Delay a big purchase, pause one travel season, or pick up limited side income. Small choices can greatly extend portfolio life.

A (hypothetical) client story

Mark and Mary were set to retire in June. In April the market slipped hard and they worried they would have to cancel everything. So, we reviewed their plan. They already had three years of cash and short term bonds, a guardrail system for withdrawals, and a clear rebalance plan. Their action items were simple: take the year one income from reserves, skip a kitchen upgrade for now, and direct new dividends and interest to cash. By fall the portfolio had stabilized. They retired on schedule, with the remodel moved to next year.

Your DIY pre-retirement crash checklist (if you really want to DIY)

• Income map: List year one through year five withdrawals by account, so you know exactly where cash will come from if markets dip.
• Reserves: Confirm you have at least three years of planned withdrawals in cash, money market and/or short duration bonds.
• Guardrails: Write down the portfolio levels (percent down or up) that trigger a spending trim or a raise.
• Rebalance rules: Set target bands. For example, if stocks fall 5 to 10 percentage points below target, rebalance from bonds. (this is not a specific recommended percentage range)
• Tax plan: Identify loss harvesting candidates and potential Roth conversion ranges before year end deadlines.
• Big ticket timing: Stage large purchases for stable markets or fund them from cash that is already set aside.

Common mistakes to avoid

• All or nothing thinking. You do not need to delay retirement by a full year. Often a small spending trim and a clear reserve plan do the job.
• Chasing losses. Doubling risk to “earn it back” can turn a rough patch into a real setback. Stick to your allocation and your rules.
• Unplanned taxes. Year end mutual fund distributions, a property sale, or a large Roth conversion can push you into a higher tax bracket or trigger Medicare IRMAA. Coordinate moves with your CPA.

Helpful resources

• Retirement planning videos on our YouTube channel
• The Perfect Retirement Plan? Podcast on Spotify
• Book a 20 minute discovery call

Let's take some action on this!

Open a simple worksheet and map the next five years of withdrawals. Fill the cash and short term bond buckets to cover those years. Write down the guardrails that will trigger a small spending trim or raise. Add a note to rebalance if your mix drifts outside the bands you set. Finally, talk with a financial advisor and your CPA about harvesting losses or doing limited Roth conversions while prices are lower.

You do not have to fear a market drop on the eve of retirement. With the right cash reserve pool, some 'rules', and a few smart tax moves, you can retire on schedule and give your investments time to recover. THAT is how you keep calm and keep your plan on track.

Remember, it's not about having the smartest advisor, the most money saved, or the highest probability of success. The perfect retirement plan for you is the one you act on.